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Tedious Peak Oil Claims From The EU Energy Policy Blog

Not all peak oil analysis comes across as sloppy, misleading, and a bit tedious, but this one does: “Peak Oil Driving The Global Gas Shift.” Of course sloppy analysis abounds on the internet, and the best approach is usually to ignore it, but this example appears on the somewhat respectable site of the EU Energy Policy Blog.

The introduction to the article is set up as a contrast to the rosy outlook of a Citigroup report that claimed the shale gas boom was set to transform into an oil boom in North America. Not so fast, our author warns. Then, after a few “peak oil-friendly facts” picked from a subsequent US Energy Information Administration report (link), the author gives us the bad news from Iranian production:

The shrinking spare capacity of the OPEC states, of 2.5 Mbd, is almost exactly what Iran was exporting until late 2011, following a year average 2.6 Mbd in 2010, but since 2011 and for reasons only partly related to sanctions, and closer related to depletion, its oil output is falling: Iran’s net exports and export supply capacity may stand at only 2.2 Mbd today. Some sources suggest even less than that. In 1976, Iran could produce 5.75 Mbd and export far more than 4 Mbd to a world market that, at the time, consumed about 62 Mbd compared with 89.7 Mbd today. Explaining this while denying depletion and the impact of oil consumption growth in exporter countries and worldwide is mental gymnastics!

Allow me to attempt the “mental gymnastics,” which in this case seems to be the mental equivalent of sitting on a balance beam and swinging my legs: to wit, the internet search! Yielding an EIA country report on Iran and this chart:

Iranian Total Oil Production and Consumption, 1977-2010

EIA, Iranian Total Oil Production and Consumption, 1977-2010

The International Energy Agency’s numbers on Iranian oil production look much the same. Admittedly, our author is making claims about 2011, and especially about changes since 2011 (i.e. production over the first month or two this year), while the chart about only shows data through 2010. So imagine a slight drop for 2011 and a sharper drop for early 2012, perhaps like the drop seen in 2002. The IEA’smore recent analysis of Iranian oil suggests that production fell by 1.5 percent in February 2012, to the lowest rate in three years.

But can we call this a Peak Oil omen? Obviously, as the chart shows, Iranian oil production is down from the high levels of the 1970s. But, with the helpful labels inserted by the U.S. EIA “Iranian Revolution” and “Iran-Iraq War,” it is easy to see that the so-called above-ground factor of politics and war have driven the most significant swings in production. In addition, the chart makes clear that net exports (and most of the numbers cited in the paragraph quoted are net export numbers) depend on production and domestic Iranian consumption.

So far as I know, peak oil is a theory about production rate limits enforced by physical realities, not a theory about international trade. Net export data is at most suggestive. And especially when the trade data cited comes from a period of explicit trade sanctions imposed by nations who previously were significant trading partners, it seems all to easy to believe that the above-ground factors of politics are dominating the export data changes, and not the physical limits of depletion.

The author follows the Iran discussion with a wide-ranging sketch of gas market shifts, global energy policies toward renewables, and hopes for electric vehicles – the sort of view of the world you can have from reading many government reports on energy policies. Ultimately the author asserts a global move from oil, despite its high value, to natural gas, despite its lower value.

To me, the economics of the conclusion seems less than well worked out.